The terms OMS (Order Management System) and EMS (Execution Management System) are often confusing terms even for professionals in the financial services industry. The duties of the two management systems are divided by a fine line between them. That’s because both order and execution management systems allow companies to place and track the results of orders.
In the early days, OMS and EMS worked as a single monolithic software called the OEMs. Although there is a distinction in recent times, a lot of service providers prefer the old way. It is because they work the best when used together.
The contrasting line to divide the two is easier to understand if one considers the person interacting with the systems. Typically, an OMS is operated by Portfolio Managers while EMS is interacted by traders.
Learn more about them in the article in detail.
Order Management System – What is it?
To start, in simple words, it is an electronic system designed to execute orders in an efficient manner. Brokers and dealers use this system when filling different types of securities. It is a cost-effective way to fill and track these orders throughout the system. That is why OMS is also referred to as a trade order management system.
Besides, the management system is also used by eCommerce companies to streamline and automate the sales and fulfillment process right from selling a product to its timely delivery.
Execution Management System – What is it?
This system offers connectivity to traders allowing them to manage and execute order books on a digital platform. But that is not the only thing about this management system. It is designed to show market data and seamlessly provide access to different trading destinations. The management system contains several independent algorithms like TWAP and VWAP to help traders predict global market conditions.
Besides, EMS has the capacity to manage orders across different trading destinations, viz., stock exchanges, stock brokerage firms, electronic communication networks, etc. Another thing that makes this management system a must-have among companies is its speed and processing power.
Why do Businesses and Traders need Order and Execution Management Systems?
The reason why businesses need an OMS and EMS or OEMS is to streamline the order fulfillment process. Having an all-in-one platform to manage and track everything from the point of delivery to the delivery process is exceptionally helpful to businesses. eCommerce companies can leverage the solutions of the platforms to automate and track logistics, shipments, returns, and other things.
As far as traders are concerned, the management system helps them to enter and execute orders. Using the platform significantly lowers transaction costs while also minimizing errors. Some service providers also ensure that their OEMs platform automates different trading strategies and mitigates risks as much as possible.
Therefore, businesses and traders benefit from the system for the best execution and management solutions.
While some prefer OMS over EMS, some do the reverse. However, recent trends in the industry suggest that companies are inclined more towards order and execution management as an integration of the two systems. These integrated systems can deliver every solution that OMS and EMSs used to do as single platforms.
Therefore, hiring a company that provides a merged solution is likely to be beneficial in terms of trading, compliance, technology, and operations.